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2022 (1) TMI 1208 - AT - Income TaxPenalty u/s. 271(1)(c) - disallowance of expenses - Proof of bonafied error - as per DR non-striking off the irrelevant portion in the notice u/s. 274 r.w.s. 271(1)(c) of the Act dated 03.03.2015 does not create any ambiguity as the assessee was well aware that the proceedings have been initiated for furnishing inaccurate particulars of income - HELD THAT - It is not disputed that the assessee is eligible for the claim of the expenses but it was disallowed to the extent of ₹ 91,96,966/- out of the total claim of the assessee. We have also considered that the Ld. CIT(A) has observed that the assessee realized the mistake and filed revised statement of income at para 5.2 in quantum appeal. Therefore, the claim made by the assessee was not wrongfully but was on account of bona fide error to the extent for which the amount is added in the total income. This error in making the claim of expenses cannot be equated with the furnishing of inaccurate particular of income. Considering, the above finding and observations made by the lower authorities and following the decision of Hon ble Supreme Court in the case of CIT Vs. Reliance Petro Products Ltd. 2010 (3) TMI 80 - SUPREME COURT - thus we hold that there cannot be a penalty where there was bond fide error in the claim. We hold that there was wrong claim in the return of income filed by the assessee which cannot partake the characteristics of furnishing in-accurate particular of income. Therefore, we delete the levy of penalty considering it as bona fide error. Hence, the ground of appeal of the assessee is allowed.
Issues Involved:
1. Validity of the penalty order passed by the CIT(A). 2. Application of Section 292B of the Income Tax Act. 3. Justification of the penalty under Section 271(1)(c) of the Income Tax Act. 4. Alleged concealment of income and furnishing of inaccurate particulars by the assessee. Detailed Analysis: 1. Validity of the Penalty Order Passed by the CIT(A): The assessee challenged the penalty order passed by the CIT(A), arguing that it was bad in law, illegal, and arbitrary. The Tribunal noted that the CIT(A) had confirmed the penalty levied by the Assessing Officer (AO) for the assessment year 2012-13. The penalty was based on an addition of ?91,96,966/- which was sustained in the appellate order. The Tribunal observed that the CIT(A) had given detailed findings on both technical grounds and merits while rejecting the assessee's appeal. 2. Application of Section 292B of the Income Tax Act: The assessee contended that the penalty notice was invalid due to non-application of mind and that the provisions of Section 292B were incorrectly invoked by the CIT(A). The Tribunal noted that the CIT(A) had rejected this ground, stating that the AO did not err in concluding the penalty proceedings and deriving specific satisfaction over the appellant’s failure to furnish accurate particulars. The CIT(A) held that the judicial pronouncements relied upon by the appellant were not squarely applicable to the facts of the case. 3. Justification of the Penalty under Section 271(1)(c) of the Income Tax Act: The Tribunal examined whether the penalty under Section 271(1)(c) was justified. The AO had initiated penalty proceedings for furnishing inaccurate particulars of income, based on the excess provision for bad debts written back by the assessee. The Tribunal noted that the AO had considered the arguments of the assessee, which included technical grounds and merits, and found that the assessee had deliberately furnished inaccurate particulars. The CIT(A) also supported this view, stating that the assessee did not voluntarily offer the income and only reconciled the discrepancy when prompted by the AO. 4. Alleged Concealment of Income and Furnishing of Inaccurate Particulars by the Assessee: The Tribunal evaluated whether the assessee had concealed income or furnished inaccurate particulars. The assessee argued that the error was a bona fide mistake in computation, which was rectified during the assessment proceedings. The Tribunal referred to the Supreme Court's decision in CIT vs. Reliance Petroproducts Ltd., which held that merely making an incorrect claim does not amount to furnishing inaccurate particulars. The Tribunal concluded that the assessee’s error in claiming the provision for bad debts was a bona fide mistake and did not equate to furnishing inaccurate particulars of income. Conclusion: The Tribunal held that the penalty levied for an amount of ?28,41,863/- was not justified as the error was a bona fide mistake. The Tribunal deleted the penalty, allowing the appeal filed by the assessee. The order was pronounced in the court on 28/01/2022 at Ahmedabad.
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